Personal Finance Basics For Women
Are we really talking about money on a spiritual business blog? The answer is hell yes. This sh*t is important and if you’re feeling weird even reading this, I can promise it’s the exact post you need for your journey to financial abundance.
I know you want to manifest abundance and success in your business. But you simply cannot manifest your way out of not understanding this stuff. In fact, the less that you understand this, the bigger a financial block you have. (I’m speaking from personal experience here!)
The only way out is through.
You don’t have to play small and afraid around money for your whole entire life. You can learn how to not only understand money but feel confident and powerful in your financial planning and money decisions. Let’s begin!
The Financial Reality of Women & Money
Women are increasingly inspired to take control of their finances. Yet, societal biases and economic disparities continue to hinder our collective financial progress.
The current financial system (and society at large) was not set up to empower you around money. But you can’t shrug your shoulders and expect that it will all just figure itself out. (Nor should you bank on anyone else doing it for you.) For your own security, you must take a proactive stance towards learning about money and creating wealth.
But don’t be afraid! It’s not as complicated as you might fear. With some understanding of basic financial principles and a few effective strategies, you can achieve financial security and independence.
Obstacles To Wealth
Women often face specific financial hurdles, such as career interruptions for family care and the gender pay gap. Here are some things to think about:
Financial Trauma
We live in a society that shames us for not having money (while also praising people who have it, even if they didn’t earn it themselves). For many people, that shame is toxic. It’s a wound that is put on us and one that we choose to agitate within ourselves over and over again.
Becoming confident with money involves healing your financial trauma, whether that stems from your childhood, a previous relationship, or last week. Your money story isn’t necessarily your fault but your financial future is your responsbility.
Capitalism
Like or not, capitalism is the system we all live under. Unfortunately, this system needs money “losers” in order for others to be money “winners”. If you’re a compassionate person or a fellow neurospicy with Justice Sensitivity, all of this might tempt you into just giving up entirely. However, opting out of the proactive approach to your finances only ensures hardship for you in the long run. You’re already playing the game, whether you like it or not. So let’s learn how to get a bit better at it.
The Gender Pay Gap
Women still aren’t paid the same as men, nor do they see the same career opportunities. While we all need to continue to push for equality, you should also keep this in mind for your own life and always push for career growth and raises.
The Pink Tax
Fact: it’s just more expensive to be a woman and this goes well beyond fashion. We’re expected to wear makeup, have a manicure, and always look polished for fear of “letting ourselves go”. If you want to keep up (or go for extra procedures you think you need like Botox) then it will cost you. Just please don’t prioritize spending on this instead of saving for your future!
Caregiving Responsibility
While becoming a mother is a magical time, taking time off to be a parent has a devasting effect on personal finances, especially over the long term. Many women never recover back to the same level of pay they had before. Keep this in mind if you’re planning a family and plan ahead as much as possible for both childcare and your future personal finances.
Long Life
Statistically speaking, women still outlive men. Which is great news for us! But we also need to financially plan for it. Think about what kind of life you want for yourself in your later years and start planning for that now.
Understanding Basic Financial Concepts
Budgeting
Create a realistic budget to track income and expenses. How much is coming in? And how much is going out? Be realistic and start planning for essentials, long-term savings, and big financial goals.
When it comes to spending, a good rule of thumb is that if you can’t afford to buy it twice, you can’t afford it.
Debt Management
Stop hiding away from your bills and create a solid plan of attack for any existing debt. Strategize and pay off any high-interest debts (like credit cards) first and consider strategies like the snowball or avalanche methods.
Saving and Investing
Your paychecks aren’t just here to fund your current life. They’re also building your future. So be wise with them: start an emergency fund, invest in retirement accounts (like 401(k)s and IRAs), and explore other investment options. (More on this later!)
Credit Score
What’s your credit score? No matter what it is now, there’s almost always room for improvement. Start creating good credit by paying bills on time and limiting credit card debt.
Key Strategies for Financial Success
Educate Yourself
Your financial education is in your own hands! So let’s take action on it. And lucky for us, education is easier than ever before. Listen to podcasts, watch some key YouTube videos, read books, or take online courses to boost your financial knowledge. (I’ve included some of my favorite resources down below!)
Take Charge of Your Finances
Track Your Spending
Even in terms of manifestation, it’s essential know exactly what’s coming in and what’s going out every month. Start keeping track now to get a realistic financial picture. Where is your money going? (And is it where you want or need it to go?)
Create a Budget
No one loves the word budget but it’s important to have a plan for your money, no matter how much (or how little) you have. Plan out your funds to cover essential expenses, savings, and more frivolous spending.
Set Clear Goals
What do you want your life to look like? Now? In five years? In twenty years? Those are important questions to ask and will help you set some financial goals for both the short and long-term. That might mean going on a trip, buying a home, starting a business, or retiring early. Break down the larger goals into smaller steps that you can start on right now.
Set Up for Your Future
Invest in ETFs
You don’t have to understand the stock market or bet on individual stocks in order to make money on the stock market. An ETF, or Exchange-Traded Fund, is a type of investment fund that tracks a specific index, commodity, or other asset. Think of it as a basket of securities, like stocks or bonds, that you can buy and sell on a stock exchange just like a single stock.
By investing in an ETF, you gain exposure to a variety of assets, reducing risk and potentially increasing your returns. Basically, it’s like buying a chunk of the market as a whole: a much safer investment than any individual stock could ever be.
ETFs offer several other advantages, including diversification, lower fees compared to many mutual funds, and the ability to trade throughout the day. Translation: it’s very simple to plan for your financial future by regularly investing in ETFs. Plus, you don’t need a complicated strategy or a financial advisor to do it. You can do this yourself–and ultimately that means, you get to keep more of your own money.
Retirement Savings
Retirement savings are simply investment savings specifically for your later years. You can invest in ETFs on your own inside an IRA and also contribute to more traditional retirement accounts like 401(k)s.
401(k)
A 401(k) is a retirement savings plan offered by many employers. Employees can contribute a portion of their paycheck to the plan, often with the option of employer matching contributions. (Hello free money!) The funds grow tax-deferred, meaning you won’t owe taxes on the earnings until you withdraw them in retirement. (In Canada, this is an RRSP.)
There’s also a 401(k) option for you if you’re self-employed, so no excuses!
IRA
An IRA, or Individual Retirement Account, is a personal retirement savings account that allows individuals to save and invest money for the future. There are two main types of IRAs:
- Traditional IRA: Contributions may be tax-deductible, and earnings grow tax-deferred. Withdrawals in retirement are typically taxed as ordinary income.
- Roth IRA: Contributions are made with after-tax dollars, but qualified withdrawals in retirement are tax-free. (In Canada, this is similar to a TFSA or Tax Free Savings Account.)
Important Note: if you’re making less that $50k, prioritize maxing out your IRA/TFSA first. 401(k) offer a tax benefit but that benefit is basically useless unless you’re making a certain level of income.
Emergency Fund
Life happens and we all get hit with unexpected financial expenses. (Job loss, partner loss, etc.) The standard financial advice is to have about three months of expenses in an emergency fund. And it should stay for emergencies (ie. not the Nordstrom sale week).
Ideally, this should be in a high-interest savings account where it can earn itself a little extra money–not in a stock or ETF that might not be up when you need it.
- Aim to save at least three to six months’ worth of living expenses.
- Automate savings by setting up automatic transfers from your checking account.
Life Insurance
There are only two certainties in life: death and taxes. And you might as well prepare for both! What happens to your loved ones if the worst happens? It’s quite immature not to think about this. You don’t have to go overboard but it’s smart to protect your loved ones (especially your children) with adequate life insurance coverage.
- Review your insurance coverage to ensure adequate protection for yourself and your family.
- Consider life insurance, disability insurance, as well as health insurance. If you have your own business, you need separate insurance for that but there might be plans that can support all your needs.
- Consult with an insurance agent if necessary to assess your needs. But please do your research and watch out for scams! (The insurance world is rife with them.) For example, you probably don’t need whole-term life insurance if you make less than $200k, no matter what anyone says. If someone tries to push this on you, run away. And don’t be afraid to ask questions! Sometimes they will hide the true nature of what you’re purchasing. Don’t let yourself be pushed into purchasing if you don’t fully understand it.
Get Paid What You’re Worth
Negotiate or Set Your Rates with Confidence
Whether you’re self-employed or not, it’s crucial to take a proactive approach to your salary and financial future. Do some research about industry standards and salary ranges to figure out what you should be earning in your industry with your experience.
If you don’t have practice with salary negotiation (as many of us don’t) find a friend that you can practice with. Or look online for a class to help you become more skilled with salary negotiations. And don’t feel badly about feeling nervous about this! It’s just a skill, like any other. You can’t blame yourself for not feeling comfortable if you’ve never learned about it before.
For the self-employed: I’ve worked with more than my fair share of women who had imposter syndrome about their rates. In other words, if you’re a coach who’s looking to escape your 9-5 simply replacing your current hourly salary is not enough. You have to take into account your business expenses, administrative time and everything else involved. (PS – You are worth a lot more than you are getting paid!) As an entrepreneur, you might have to start lower in the beginning to get some testimonials and experience but aim to raise those rates ASAP.
Advocate for Yourself
Don’t be afraid to ask for raises and promotions. Don’t assume your employer knows how hard you’re working and is thinking about you, because all too often, they simply aren’t.
If you’re working in a 9-5, you have to start taking a proactive approach to your salary, effective immediately. Keep track of your projects and statistics. Focus on what you’re brining to the team or company. Try to review what you’re working on with your superiors regularly and ask for feedback on what you can improve upon. (Don’t wait to do this at the year-end meeting!)
You should also keep in mind that with every year, you get more valuable. It will always cost the company more money to train someone new than to retrain you. You have more negotiation power than you think! Don’t be afraid to ask for a lot (in either initial salary or a raise) and negotiate your way to a happy medium.
This also applies to you if you’re self-employed. You have to take inflation into account or you will simply earn less this year over last. Build rate bumps into your regular schedule and tell your regular clients about it. (However, if you only onboard new clients, this isn’t as necessary.)
Getting Extra Help
Don’t Consult A Financial Advisor
Personal story, I have used a financial advisor who I later found out did not have my best interests in mind. So please proceed with caution. If you’re looking for someone to do the hard work because you don’t understand it, please know there are a lot of people out there who will take advantage of that. That’s why education is so important.
Most people do not need a financial advisor (including, probably, you). If you have a complicated situation then it might be worth it. But please do your research! Many financial “advisors” are really just fancy salespeople who will be taking some of your hard-earned dollars. It’s also key to know that most stockbrokers do not outperform the stock market.
Use RoboInvestors
Use AI robots to invest? Yup! This is the future and you can take advantage of it. Many financial institutions offer roboinvestors: robots who will do the job of investing better than most humans could ever. Again, do your research ahead of time. But for most people, this is the only type of investor you need.
Seek Out More Online Resources
Again, learning is the name of the game. I’m just scratching the surface here but there are lots of communities and tools online that can help you to learn and manage your own finances. Instead of dreading it, find a teach or two who you vibe with.
Your Secret Finance Weapons
Time
Start saving early to maximize the benefits of compound interest. If you want to take this to the next level, look up FIRE and LeanFIRE to get some projections on the money you need to retire and how long it might take to get there.
Set It and Forget It
Pick your favorite ETFs and set up automatic payments so you don’t have to worry about it. Yes, you should check in every month or two, but there’s no need to stress out about current market conditions. (And remember, your money is never really down unless you have to take it out.)
Dollar Cost Averaging
Basically, that means ignoring the current trends of the market and just investing regardless. The market’s up? Invest. The market’s down? Invest! This removes a lot of the stress about the current state of the stock market, with the knowledge that your investments will tend to double every seven years or so. Don’t let market bumps scare you away from investing.
Free Financial Planning Resources
- Check out this free PDF by William Bernstein: If You Can: How Millennials Can Get Rich Slowly
- Money for Couples podcast by Ramit Sethi
- Money Feels podcast by Bridget Casey & Alyssa Davies (Great for my fellow Canadians but also US-friendly!)
- Financial Feminist podcast by Tori Dunlap
Financial Planning Books
- The Psychology of Money
- The Simple Path To Wealth by JL Collins
- The Millionaire Next Door
- How To Make Your Money Last by Jane Bryant Quinn
- The Five Years Before You Retire by Emily Guy Birken
- Retirement Planning Guidebook by Wade Pfau
- The New Retirement Savings Time Bomb by Ed Slott
- The Wealthy Gardner by John Soforic
- The Richest Man in Babylon by George Clason
- Die with Zero by Bill Perkins
- Against The Gods by Peter Bernstein
- Devil Take The Hindmost by Edward Chancellor
- The Four Pillars of Investing by William Bernstein
Final Thoughts On Personal Finance Tips For Women
Stop giving your power away out of fear! Your financial future is in your hands. By taking proactive steps and seeking expert advice, you can achieve financial security and independence.
Ready for more? Read this: business ideas for your human design type or how to improve your money mindset.
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